Focus stays on RAM as Indian Bank tilts towards MSMEs: MD & CEO Binod Kumar

he bank's managing director and chief executive officer Binod Kumar shares the impact of the merger on its growth

Chennai-based Indian Bank completed the fifth year of its amalgamation during the first quarter (Q1). The bank’s Managing Director and Chief Executive Officer Binod Kumar shares the impact of the merger, the current US tariff scenario, and long-term growth plans in an in-person interview with Shine Jacob. Edited excerpts:

 

Q1 marked five years since the merger of Allahabad Bank into Indian Bank. How do you view the growth story over this period?

 

It was an amalgamation of almost equal banks, and that created synergy. Our presence has grown manifold. The cultures were different: Indian Bank has traditionally been conservative and was largely unscathed during the asset quality review, while Allahabad Bank had strong expertise in corporate credit. The combination of conservatism and corporate strategy worked well for us.

 

That’s why our asset quality has steadily improved. Gross non-performing assets (NPAs) have dropped from 11.39 per cent at the time of amalgamation to 3.01 per cent now. Net NPAs have fallen from 4.19 per cent in March 2020 to 0.18 per cent in June 2025 — among the best in the industry. 

Similarly, net profit, which was negative at ₹4,643 crore in March 2020, turned around to ₹10,918 crore in the last financial year. Our return on assets stands at 1.32 per cent, better than many private banks. Overall, the merger has been very successful, helping us expand our business, footprint, and culture.

 

What are your long-term growth targets, and where do you see the retail, agriculture, and micro, small and medium enterprise (MSME) portfolio — collectively referred to as RAM — heading?

 

India’s credit-to-gross domestic product ratio is about 55 per cent, so there’s ample scope for credit expansion. My focus will remain on RAM, with greater emphasis on MSME. MSME accounts for around 17 per cent of our loan book; I want to take this to at least 20 per cent. Retail is about 21 per cent, which I aim to increase to 25 per cent.

 

At the same time, we’re also focusing on corporate credit. In the past three months alone, we sanctioned ₹27,000 crore across power, roads, smart metering, and city gas distribution. Altogether, the share of RAM and corporate credit is expected to settle at 67–68 per cent and 32–33 per cent, respectively.

 

Your exposure to textiles and engineering is high. How do you see the impact of US tariffs on these industries and your bank?

 

From an industry perspective, there will definitely be some impact. Some companies may lose orders due to price competitiveness or be unable to export because of tariffs. Sectors like textile, gems and jewellery, electronics, and engineering goods will be hit.

 

For our bank, the risk is limited. Our total exposure to these sectors in the US market is less than ₹1,000 crore — under 1 per cent of our loans. We’re already in discussions with affected players. Their working capital requirements will likely rise, and if needed, we’re ready to provide additional support. I also expect some government relief measures.

 

The Reserve Bank of India (RBI) has introduced new rules on gold loans. You’ve grown this segment in the past year. What are the implications?

 

Initially, we were concerned. But now the RBI has clarified that pledging jewellery as collateral will not be treated as a violation. So, our gold loan business won’t be impacted. Gold remains the primary investment for many households. If bank guidelines had been too strict, borrowers might have gone to non-banking financial companies or moneylenders. Now, that won’t be necessary, and banks can continue to grow this business. It’s also in the customers’ long-term interest.

 

Your branch network is still concentrated in the South, East, and Central regions. What’s your expansion strategy?

 

We’re now expanding our footprint where our presence is thin. Only 19 per cent of our 5,909 branches are in the Western and Northern regions. We’re focusing on states like Maharashtra, Gujarat, Madhya Pradesh, and Rajasthan.

 

We’ve identified 200 locations for new branches. We aim to have a branch in every district headquarters. We’re also looking at emerging urban areas and industrial clusters with growth potential.

 

How are you improving the bank’s digital ecosystem?

 

We’ve been investing about ₹1,500 crore annually in technology for the past few years. Today, 12-13 per cent of our business — ₹1.67 trillion — is sourced digitally. At the time of the merger in 2020, only 51 per cent of our transactions were digital; now it’s 93 per cent.

 

Still, only 20 per cent of active customers use mobile or internet banking. Imagine if that rises even to 50 per cent, we’ll be able to redeploy manpower into marketing and other areas. That’s the next big opportunity, so we’re focusing on customer education. Around 600,000 customers visit our branches daily — we want to bring that number down.

 

How did the bank perform in Q1? 

After many quarters, we’ve delivered double-digit growth, and the market has responded well. Deposits grew 9.26 per cent, advances 11.5 per cent, and the current account savings account ratio remains healthy at around 39 per cent.

 

RAM growth was 15.93 per cent, while MSME, which had earlier been a challenge, grew 14.5 per cent. Net profit rose 24 per cent. Credit cost fell to 0.28 per cent.

 

Our net interest margin contracted by 13 basis points, but I’ve guided for net interest margin to remain in the 3.15–3.3 per cent range. Special mention accounts also declined by more than 5 per cent.

 

A number of infrastructure projects are underway in South India. Which sectors are you targeting?

 

We’re seeing good traction in wind, solar, automotive ancillaries, traditional power, and real estate.